EMERGING MARKETS-Colombia peso leads losses in Latam FX markets
* Colombia hints at more intervention to curb peso gains * US fiscal debate weighs over Latam currencies in general * Brazil real drops 0.2 pct; Mexico peso down 0.1 pct By Walter Brandimarte RIO DE JANEIRO, Jan 15 (Reuters) - The Colombian peso led losses in Latin American foreign exchange markets on Tuesday, after the government hinted at more aggressive intervention to curb the currency's strength and protect exporters. Other currencies in the region also posted losses as the U.S. fiscal debate heated up in Washington, reducing investor appetite for emerging markets assets in general. The Colombian peso dropped 0.6 percent to 1,769.95 per dollar after Finance Minister Mauricio Cardenas said the government is studying ways to step up dollar purchases, in an attempt to halt a rally that increased the peso's value by nearly 9 percent last year. The Colombian central bank could increase the size of its dollar purchases to a daily average of $30 million, estimated Felipe Hernandez, a Latin America strategist with RBS. "We acknowledge additional central bank intervention could moderate currency appreciation in the medium term, but believe it would still allow for more appreciation in the short-term if dollar inflows during the next few weeks or months more than offset central bank demand," Hernandez wrote in a research note. U.S. FISCAL CONCERNS The Mexican peso declined 0.1 percent and remained vulnerable to further losses after gaining more than 3 percent since late December to a 10-month high on Monday. Uncertainty about how U.S. lawmakers will resolve a debate about lifting the country's borrowing limit to avoid a potentially disastrous debt default could weigh on the peso in the coming weeks, analysts said. "We are expecting a breather and a possible correction in the markets," said Rodolfo Campuzano, head of analysis at brokerage Invex in Mexico City, adding that the peso could weaken back to between 12.80 and 12.90 per dollar. Mexico sends nearly 80 percent of its exports to the United States and it could suffer the most if U.S. debt and budget negotiations hurt the U.S. economy. Mexico's currency is also one of the most liquid emerging market assets and the peso swings sharply according to the global appetite for risky assets. The Brazilian real closed 0.2 percent weaker at 2.0355 per dollar, also pressured by U.S. fiscal concerns, which increased after President Barack Obama rejected on Monday any negotiations with Republicans over raising the U.S. borrowing limit. Analysts expect, however, the real to strengthen near the level of 2 per dollar in the medium term as rising inflation will probably make the central bank more tolerant to a stronger currency. Brazil's inflation currently runs above the center of a government target of 4.5 percent, plus or minus two percentage points, and an expected increase in domestic fuel prices in the next few weeks will likely complicate the central bank's monetary policy. Latin American FX prices at 2004 GMT: Currencies Daily YTD pct pct change change Latest Brazil real 2.0355 -0.20 0.22 Mexico peso 12.6300 -0.08 1.85 Chile peso 474.9000 -0.29 0.80 Colombia peso 1769.950 -0.59 -0.22 0 Peru sol 2.5410 -0.16 0.39 Argentina peso 4.9475 0.10 -0.71 Argentina peso 7.3400 -1.23 -7.63
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